People often mix up policy limits with coverage. Coverage is the type of protection an insurance policy provides - such as liability, collision, or uninsured motorist coverage. Policy limits are the maximum dollar amounts the insurer will pay under that coverage for a particular loss, claim, person, or accident. So a driver may have liability coverage, but the policy limits decide whether that means $25,000 or $250,000 is available.

That difference matters fast after a crash, especially when medical bills, lost wages, and vehicle damage start piling up. If the at-fault driver's liability policy has low limits, the insurer does not have to pay beyond those limits even if the harm is much greater. In a serious injury case, that can shape settlement talks, whether a lawsuit makes financial sense, and whether other sources of recovery - like underinsured motorist coverage or a claim against another responsible party - need to be explored.

In Vermont, minimum auto liability limits are set by 23 V.S.A. § 800 (2024): $25,000 for one person's injuries, $50,000 for injuries to two or more people in one crash, and $10,000 for property damage. Those are only minimums, and they may be far too low after a major collision on I-89 or Route 7. When an insurer says an offer is "the policy limits," that usually means it claims no more money is available under that part of the policy.